Authorities: Debt-Collector Scam Bilked Millions

By MICHAEL TARM Associated Press

CHICAGO February 22, 2012 (AP)

A phone scam in which callers in India posed as debt collectors bilked millions of dollars out of more than 10,000 U.S. residents by using threats of arrest or the loss of their jobs, U.S. authorities said Tuesday in what they described as a first-of-its-kind investigation.

Callers drew on personal data snatched from payday loan websites, Federal Trade Commission official Steven Baker said. More than 20 million calls may have been placed over the past two years, with collectors demanding between $300 and $2,000 per call.

Such a far-reaching fraud with so many millions of calls flooding in from India is something investigators haven't seen before and was fostered in part by the plummeting costs of international calls, Baker, the FTC's Midwest director, said.

While federal authorities seem to have put a halt to this one scam by freezing the assets of a California-based business allegedly involved, Baker said other similar scams are almost certainly up and running.

"We think this is just the tip of the iceberg," he said.

Authorities have received more than 4,000 complaints about debt-collection schemes in recent years, said Baker. They describe aggressive, foul-mouthed callers, some of whom claimed to be agents of a nonexistent Federal Department of Crime and Prevention.

JanLaree Dejulius, of Las Vegas, was at work at a university office when she got a call from a man who gave his name as Officer Black. He knew one of her relatives had taken out a payday loan online. If Dejulius didn't pay up, he said he would send someone to her work to arrest her, she said.

"I said, 'Yeah, I'll pay you — whatever it takes (not to get arrested),'" the 57-year-old said at a news conference in Chicago. "I consider myself savvy, but I fell for it." She eventually agreed to pay $763.

Some callers threatened to call victims' bosses or sue them. The scare tactics were so effective that in some instances people agreed to pay hundreds of dollars even though they knew that neither they nor any acquaintances had payday debts, said Baker.

From 2010 to 2012, $5 million was paid in 17,000 transactions to accounts controlled by the alleged fraudsters. The targets included people who applied for loans by punching personal details into a payday site but whose applications were rejected, Baker said.

Payday loans are typically small, very short-term loans with extremely high interest rates that are effectively advances on a borrower's next paycheck. It is often people cash-strapped or living from paycheck to paycheck who use the service, Baker said.

Baker said to guard against scam artists, consumers should demand a written notice with debt amounts and the names of creditors. Debt collectors never have authority to arrest anyone, Baker added.

Asked what advice she'd give to would-be victims if they get a call, Dejulius said they shouldn't give in.

"Call them on it," she said. "Call their bluff if you know you haven't taken out a loan."

Baker said many questions remain unanswered, including how callers obtained such a vast amount of payday-loan information. He said the U.S. government needs help from authorities in India, where it is thought that all of the bogus calls came from.

The FTC charged Villa Park, Calif.-based American Credit Crunchers LLC, Ebeeze, LLC and their owner, Varang K. Thaker, with violating the FTC Act and the Fair Debt Collection Practices Act. No criminal charges have been filed.

Thaker allegedly withdrew thousands of dollars paid by victims that ended up in his company accounts, though Baker said it wasn't clear if the overall scheme was directed primarily from California or India.

A U.S. district judge in Chicago has issued an order freezing Thaker's assets.

American Credit Crunchers or Ebeeze in Villa Park, Calif., did not have a current phone listing. There also was no listing for a Varang K. Thaker in the area. Federal court filings did not list an attorney for Thaker. The Online Lenders Alliance, an industry group for companies that offer loans over the Internet, said it reported complaints about the fraudulent calls to the FTC two years ago and has worked with authorities to stop the scam.

During his weekly video address, Senator Chuck Grassley presses President Obama to support his legislation to root out fraud and abuse from the H-1B visa program and ensure qualified Americans have the first opportunity to compete for jobs. Grassley highlights a discussion between the President and Jennifer Wedel who called attention to the difficulty many high-skilled Americans are having finding employment in this area.

As usual, Norm Matloff's analysis of Obama being challenged by Jennifer Wedel, the wife of an unemployed semiconductor engineer, is somewhat hopeless sounding and negative, but still good reading:

Something that happened this evening is one of the most remarkable events I've seen in all the years I've been writing about the H-1B work visa and age discrimination.

I was originally going to report on an article on the age problem in the tech industry that ran in over the weekend. Nice piece, in the Bay Area edition of the New York Times, sourced from the Bay Citizen. I will indeed discuss this article later in this posting, but let me lead with this evening's case in point:

President Obama held a live video chat this evening, and one Jennifer Weddel of Fort Worth, TX, managed to get in a question: "Why does the government continue to extend H-1B visas when there are tons of Americans just like my [engineer] husband with no job?”

Mr. Weddel (I don't know if he and his wife share a surname, but for brevity I'll assume so here) is a semiconductor engineer, now out of work for three years. This of course is diametrically opposite to what Obama has been telling the country, that we have a SHORTAGE of engineers. He's called for producing 10,000 more engineers, and emphasized in his State of the Union address last week liberalizing H-1B and/or green cards to keep foreign tech workers in the U.S., to remedy that "shortage."

Obama's answer to Ms. Weddel was that, well, there are engineers and then there are engineers, and talked about specialization. He pointed out that, what with the housing bust and all, civil engineers are not in high demand these days. He then asked Ms. Weddel what kind of engineer her husband is, and she replied that he a semiconductor engineer--exactly the kind of worker Obama thinks is in short supply!

Obama looked a bit caught off balance by that, and said he'd like to know the details, because "the word we're getting is that somebody like that should be getting work right away." He asked Weddel to send him her husband's CV.

Some of the engineers and programmers who oppose the H-1B program might be saying now, as they read this, "Yes! The President will finally hear the truth about the H-1B visa! He'll discover it's a sham, and he fix the problem!"

Well, let's think about that, reason out some scenarios of what might happen now, assuming that Obama does indeed ask his staff to follow up on this.

I would guess that Obama's staff's industry contacts will make sure that Mr. Weddel will get a job out of all this. For him NOT to get a job would risk having the truth come out--which is that H-1B is about AGE, a way for employers to avoid hiring older (35+) Americans. When they run out of young Americans to hire, they have a large pool of young H-1Bs to turn to.

Now, assuming Mr. Weddel does get a job, what will Obama's staff do about the question his earlier predicament raised? Will they say, "Well, maybe the industry hasn't been fully truthful to us in their claims of an engineering shortage"? And if they do say that, will they relay that concern to Obama, and if so, will he in turn start to question his doing the industry's bidding on the H-1B issue?

A lot of ifs there, and my guess is No to all of the above. They'll simply report to Obama, "Good news, Mr. President--Weddel's husband has found a job," and he'll say "Great, next issue." He'll simply assume that the guy was an anomaly, had somehow fallen through the cracks.

Of course, that's not what SHOULD happen. Obama and his staff should ask, "Now, wait a minute...how could this guy be unemployed for three years in Texas, one of the biggest tech states in America?" But they won't ask it, either because they are so mesmerized by the industry lobbyists or because they are so financially beholden to those same lobbyists, or a combination of both. Cognitive dissonance ought to be at work here, but I doubt that it will.

In addition, there is the possibility that Obama and/or his staff are already skeptical of the industry's claims, but simply cannot afford to relinquish the industry's campaign donations. An internal document unearthed last year from the papers of the Clinton White House talks of "call[ing the] industry's bluff re: their shortage of really highly skilled and desirable workers." If that were the case with the Obama folks, Obama's surprised reaction to Weddel may have been somewhat feigned.

The worst possibility in my mind is that the Obama people take the classic Democratic Party approach and decide that what Mr. Weddel needs is...TRAINING! (Whenever I trash the Democrats like this I feel compelled to remind everyone that I'm a lifelong Democrat myself, no ulterior motive here.)

The reason training doesn't work is that older workers are expensive. After training (which many don't need anyway), they are STILL expensive. So training does nothing.

Which brings me to the New York Times/Bay Citizen article (enclosed at the end of this message). The piece does a good job of getting the point across that Mr. Weddel is definitely not alone. On the contrary, he's pretty much the norm. However, the article drops the ball in not identifying the central issue--MONEY, in the sense, once again, that the older workers are perceived as simply being too expensive.

I tried to get this point across in the reporter's interview of me last week, but I got the sense, correctly as it turns out, that his mind was already made up: The problem these older engineers have is that the technology has simply passed them by; they just don't have the latest skill sets. I pointed out that many older engineers are exact matches for jobs listed on companies' Web sites, yet never get so much as a phone call in response to their application. But by that time he'd already heard too much from others that the problem was skill sets. (More on his interviewees below.)

Ms. Weddel said she'd been married about 10 years, and she looked about 30 or so to me, which would likely put her husband in or near the danger zone I've been warning about: age 35. The industry may tell Obama that Mr. Weddel lacks some particular new technological skill, but that'll probably be just a pretext. The REAL reason engineers like Mr. Weddel have trouble finding work was well illustrated in a rare slip by Microsoft I've cited before:

Microsoft...Senior Vice-President and Chief Technical Officer David Vaskevitch...acknowledges that the vast majority of Microsoft hires are young, but that is because older workers tend to go into more senior jobs and THERE ARE FEWER OF THOSE POSITIONS TO BEGIN WITH.

(Emphasis added.)

It's like the old General Motors notion of "planned obsolescence," only for people rather than cars. And the H-1B program, made up overwhelming of young workers, is what fuels all this. In pre-H-1B days, it was assumed that engineers and programmers would learn new technological skills on their own, as part of their jobs; now, they often are not given that chance.

Reporter Glantz has written an engaging piece, certainly recommended reading, but as mentioned, it misses the boat on the central issue, that older engineers are just too expensive. Moreover, it's a pity that he restricted his research (he did tell me he was on short deadline) in employment counseling to government-financed agencies such as NOVA, and industry-tied statistics gatherers such as Hancock. Glantz would have gotten a much more accurate picture had he talked to private employment agencies, i.e. "headhunters," who would have told him that, in Microsoft's succinct words, "there are fewer [senior] positions to begin with."

As I said, Mr. Weddel is, if anything, typical. I just talked yesterday to a new PhD in a tech field. He had worked in industry for some years before returning to grad school, and did a dissertation which uses state-of-the-art technology, on a very practical topic. He had spent about 10 years at two brand-name firms, working on key projects. He's articulate and well-liked. So, he's just what Obama claims to want. Yet he told me all his fellow students doing research in that field are gettting showered with job offers, but nothing for him so far. He is also in his mid-30s.

Mr. President, how many Mr. Weddels will it take to convince you that something is terribly wrong with the H-1B program--and not just with the Indian "bodyshops"?

Meanwhile, Jennifer Wedel's story is blowing up all over the internet. I've always thought many techies were pussies when it came to the H-1B issue, and it is unfortunate that it was this engineer's wife, not him, who was the one to confront Obama on the ethnic cleansing of America engineers at the hands of the slumdog slave trade.

When I first started to take a militant stand on this issue, years ago, I was condemned for my rhetoric by many chickenshit cowards in Programmer's Guild and elsewhere. But not anymore.

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